The Nexus 7 Rumored To Be Getting A Lot Cheaper Next Year

The Nexus 7 is probably the best seven-inch tablet you can get on the market, although to be fair, once Apple gets past selling a stop-gap product we’re going to see some pretty hardcore competition in that arena. But if you’re on the fence about getting one, you might want to wait until summer, when the price will sink like a rock.

It’s worth noting the Nexus 7 is already pretty cheap, starting at $200 and topping out at about $250. But apparently that is not cheap enough for Google, which is sourcing components to lower the Nexus 7’s price:

The cost-reduction measures could eventually lead to a $99 Nexus 7 but this may not happen initially. The cheaper Nexus 7 may first be priced in the $129 to $149 range, according to the report.

Shipment estimates of the new Nexus 7 are in the range of 500,000 to 600,000 in the first quarter of shipments.

It’s particularly interesting because nobody thinks the Nexus 7 is going to stand as Google’s flagship tablet past, say, the end of next year, and even then, that’s pushing it. A Nexus 7 Mark II is almost certainly in the lab right now, being put through its paces. But the tablet is Google’s workhorse; for example, it serves as the remote for some Google Fiber customers.

But Google clearly sees an opportunity to pick a fight with both Amazon and Apple at the same time: It’s hard to imagine Amazon would be excited about a tablet that wasn’t a busted mess software-wise muscling in on the Kindle’s turf.

It’s a rumor for now, but keep an ear out: Next summer, the Nexus 7 might be too cheap to refuse.

After reports like this regarding the Kindle I have no idea how “at cost” companies plan to actually make money on these things. [blogs.barrons.com]?

Writes Bartley, “Although weak Kindle Fire de- mand is potentially positive for profitability, it does imply that Amazon is still struggling to compete against Apple (AAPL), and may even be seeing competition from Google.”

Let’s say that the Nexus 7 sells for as much as it costs Google to buy it. They gave away $20 Play store giftcards when it was released. At the 30% cut Google takes from App sales they’d have to sell about $67 worth of stuff to each person that bought a N7 to just make up for the giftcard. It is a long slow road to rely on that type of profit system.

The counter to that is that the Play store doesn’t sell as much as the iTunes store despite having a much higher marketshare.

Apple’s margins are in the 30% to 40% range, $500 iPad at 30% margin is $150 profit for Apple, which takes $500 of store purchases to equal. For Amazon and Google store purchases are the cake, for Apple they’re extra icing on the cake.